Foreign Corrupt Practices Act (FCPA): Overview, definition, and example
What is the Foreign Corrupt Practices Act (FCPA)?
The Foreign Corrupt Practices Act (FCPA) is a U.S. law that prohibits businesses and individuals from bribing foreign government officials to gain a business advantage. It also includes requirements for maintaining accurate books and records. The law applies to U.S. companies, their subsidiaries, and even some foreign companies that do business in the United States.
Why is the Foreign Corrupt Practices Act (FCPA) important?
Violating the FCPA can lead to severe penalties, including large fines and even criminal charges. Businesses that operate internationally often include FCPA compliance clauses in contracts to reduce risk and confirm that all parties agree to follow anti-bribery laws. These clauses are especially important in joint ventures, vendor agreements, and distribution deals where one party might interact with foreign officials.
Understanding the Foreign Corrupt Practices Act (FCPA) through an example
A U.S. pharmaceutical company signs a distribution agreement with a local partner in Brazil. The agreement includes an FCPA clause requiring the partner not to offer, promise, or pay anything of value to a government official to secure sales or licenses. If the local partner later tries to fast-track approvals by offering gifts to a health regulator, the U.S. company could be held liable unless it can show that it took reasonable steps to prevent that behavior—starting with a clear FCPA clause in the contract.
Example of a Foreign Corrupt Practices Act (FCPA) clause
Each party agrees to comply with the Foreign Corrupt Practices Act of 1977, as amended. Neither party shall, directly or indirectly, offer, promise, or give any money or anything of value to any government official, political party, or candidate for the purpose of influencing any act or decision in order to obtain or retain business.
Conclusion
FCPA clauses help protect businesses from serious legal consequences tied to international corruption. Including one in a contract shows that your company takes compliance seriously and sets clear expectations for anyone acting on your behalf. If you’re working across borders, this section is a key safeguard.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.